Division of Labour: June 2009 Archives
June 30, 2009
Mike Lester on the Media Coverage of Michael Jackson's Death
From today's Rome News-Tribune:
Someone Better Read the "Pile of Sh!t"
There was an interesting exchange about the cap and tax bill on yesterday morning's Fox and Friends show; here's Steve Doocy intereviewing Obama environmental official Carol Browner (transcript via lex/nex):
DOOCY: Hey, Carol, before you go, I know the bill's over 1,000 pages long. Have you read it?
I hope someone reads the monstrosity before it's too late. Here's a snip from yesterday's Rush Limbaugh program:
RUSH: Have you heard about this, folks? When you sell your house, environmental experts have to come in and do a survey to find out if you've got leaky windows, if all the environmental systems are correct, if you have relatively new appliances, and until you modernize in the way they say, you can't sell -- that's in the bill. I'm not kidding, Brian. See, you can't believe it. You can't. It's in the bill. It was in this amendment that Boehner read.
I haven't verified that Limbaugh's claim is correct (feel free to email me), but needing government permisson to sell one's home is a whole new level of big brotherism.
Posted by E. Frank Stephenson at 02:41 PM
Biking Across Europe
I came across this blog post about the possibility of a bike share program for Portland, Oregon. Two comments on the post were particularly interesting:
I happen to be from Romania. So in the news from my country, they just discovered a bunch of dedicated cyclists that were "borrowing" about 10 bikes/month from the Paris bike share program for a very long one way trip east. These things keep popping up in the strangest places, like Marrakesh Morocco.
And this one on a previous program called Yellow Bikes:
As a former Yellow Bikes(YB) volunteer, we "dumbed down" bikes by making them single speed, and replacing tubes with rubber hose that made for a hard ride. Inevitably,those bikes we 'released' would end up lost/stolen'destroyed. The Community Cycling Center, our fiscal sponsor, ended up killing the program and replacing it,later on, with Create a Commuter (CAC). CAC has an element of ownership and personal investment,something YBs lacked.
Posted by E. Frank Stephenson at 02:20 PM
Sobel on "The Rule of Law"
A five minute video of Russ Sobel discussing his new edited volume (on which I was an assistant editor) can be found here.
June 28, 2009
Shut Up, He Explained II
The Competitive Enterprise Institute has obtained an EPA study of the "endangerment" to human well-being ostensibly caused by carbon dioxide emissions, together with a set of EPA emails indicating that the study, which concludes that carbon dioxide is not a significant cause of climate change, was suppressed by the EPA for political reasons.
The Powerline blog entry provides links to the CEI correspondence and supporting email messages, and to the suppressed study.
To Heck With Stimulus--Just Get a Facial
From an AP article that appears in today's RN-T:
Diners will order big pancake breakfasts again. Business suits will sell briskly. So will name-brand luggage, gym memberships and pricey jeans. Spas will sell more facials and massages.
Maybe next recession we can skip the $787B blob of pork and just send eveyone out for pancakes and facials.
June 27, 2009
Almost live from Guatemala
On Tuesday at Universidad Francisco Marroquin in Guatemala City I gave a lunchtime talk on "The Roaring Twenties and Austrian Business Cycle Theory," which is the subject of chapter 3 of my book-in-progress The Clash of Economic Ideas. Here is a 47-minute talking-head video. After lunch I gave a 10-minute interview on free banking and the financial crisis to Luis Figueroa of UFM, video available here.
June 26, 2009
Talk About Green Jobs
Calzada says Spain's torrential spending — no other nation has so aggressively supported production of electricity from renewable sources — on wind farms and other forms of alternative energy has indeed created jobs. But Calzada's report concludes that they often are temporary and have received $752,000 to $800,000 each in subsidies — wind industry jobs cost even more, $1.4 million each. And each new job entails the loss of 2.2 other jobs that are either lost or not created in other industries because of the political allocation — sub-optimum in terms of economic efficiency — of capital. (European media regularly report "eco-corruption" leaving a "footprint of sleaze" — gaming the subsidy systems, profiteering from land sales for wind farms, etc.) Calzada says the creation of jobs in alternative energy has subtracted about 110,000 jobs elsewhere in Spain's economy. (empahsis added)
That's from a magnificent column by George Will.
Posted by E. Frank Stephenson at 03:01 PM
Two Interesting Headlines
"Couple accused of assault using Cheetos," today's Tennessean.
"Woman accused of swapping sex for arson," Wednesday's St. Louis Post-Dispatch.
1. Use the economic way of thinking to explain the conditions under which Cheetos would emerge as criminals' weapons of choice.
2. Is the offer of sex for arson consistent with the principle that trade creates wealth? Why or why not?
June 25, 2009
Three Meals in Memphis, or, Why I've Gained Weight Since Grad School
My tastes aren't nearly as refined as Tyler Cowen's or John Nye's, but I've been thinking for what I would include in this post for a long time. After lunch today, I finally know. If I were visiting Memphis and could eat three meals, here's where I would go:
Breakfast: Brother Juniper's. We're there on a semi-regular basis with out-of-town guests. I usually get the Greek omelet with home fries and a biscuit. A charming atmosphere combined with excellent food makes for a great beginning to any day. Except Monday, because they're closed. Alternate: Blue Plate Cafe.
Lunch: Cafe Eclectic. To my shame, I didn't know it existed until I went there for coffee with a colleague a few weeks ago. I was there for lunch today, and the patty melt with remoulade was possibly the best burger I've ever eaten. The roasted red pepper soup was fabulous, and the "taters" on the side were a mix of different potatoes. I expect the bakery to compete in the breakfast category soon. Alternate: Boscos.
Really Nice Dinner: Tsunami. Shannon and I celebrated our sixth anniversary here over the weekend. The food--Asian seafood--was outstanding, and the ginger donuts we had for dessert were good in a way that I didn't know existed. In the last year or so we've become fans of Gordon Ramsay's TV shows Hell's Kitchen and Kitchen Nightmares. Again, I'm no foodie, but Chef Ramsay might want to visit Tsunami--not to straighten them out, but to enjoy what they have to offer. Alternate: The Grove Grill, which does have the best shrimp & grits in Memphis.
Barbecue (I know this is four but BBQ is the local specialty): Central BBQ. You can't really go wrong with barbecue in Memphis, but Central is our favorite. I'm especially fond of the turkey BBQ nachos. Alternate: Bar-B-Q Shop.
Here We Go Again--Another Failed Bike Program
Florida Atlantic University's bike-sharing program was a simple, even utopian, plan.
There's nothing "sustainable" about open access bicycle programs. Source.
Recent Reading: In Pursuit of Happiness and Good Government
I finished reading Charles Murray's In Pursuit of Happiness and Good Government last night. I found it alternately fascinating and depressing--fascinating because he highlights the mechanisms by which policies fail to achieve their goals and depressing because he highlights the mechanisms by which policies fail to achieve their goals. There are parallels between his discussion of happiness, Ayn Rand's discussion of self-esteem, and King Solomon's detailed exploration of vanity in Ecclesiastes. "Human flourishing," or true joy, is more than just a series of feelings. It's what happens when we are free to engage the world as rational beings, to set goals and achieve them, and to create. It's a worthy complement to Thomas Sowell's A Conflict of Visions, which was originally published around the same time, and it's treatment of the knowledge problem applied to policy (education policy in particular) is thoroughly Hayekian. The competitive process orders and reveals information that cannot be known in its absence; therefore, attempts to forsake the market process and plan an educational system invariably runs into all the problems Mises pointed out in his demonstration that socialist calculation is impossible. Next up: Murray's Real Education.
From the archives, here are Lant Pritchett and Martina Viarengo on why governments supply schooling. Here are my thoughts on their paper.
June 24, 2009
The Deadweight Loss of Taxation
A news item:
Tampa will lose part of its cigar heritage in August when Hav-A-Tampa shuts its factory near Seffner and lays off about 495 employees, closing a factory that has been operating since 1902.
Re the possibility of externalities associated with smoking, see the last 3-4 paragraphs of this post by Greg Mankiw.
Posted by E. Frank Stephenson at 10:16 PM
A Book I Look Forward to Reading
Henry Mayer's All on Fire: William Lloyd Garrison and the Abolition of Slavery arrived in the mail today (thank you, Amazon.com, for making the world my library!).
Should Steve Jobs Have Been Allowed to Buy a Liver?
Robert Margo on North, Wallis, & Weingast
Here's Robert Margo's excellent and interesting critical review of North, Wallis, & Weingast, Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History. For anyone contributing to the broader NWW research agenda, Margo's review is essential. It highlights the strengths and weaknesses of NWW, particularly in contrast to Acemoglu & Robinson.
After I read it I thought that "Violence" was the book North ultimately had in mind when he was working on Understanding the Process of Economic Change. It's an appropriate follow-up to the last forty years of North's work.
In particular, it sets the stage for empirical research exploring their implicit and explicit theoretical linkages. I'm working on a project with Chris Coyne in which we're going to explore NWW's "doorstep conditions" for transition into an open-access order in the context of Reconstruction-era violence in Memphis. In particular, the 1866 Memphis riot shows how the transition from limited-access to open-access can be anything but smooth.
Government Functions: Golf Courses, Swimming Pools, and Privatization
The Memphis Business Journal published this a few days ago. I originally submitted it as an op-ed, but they asked if they could edit it and publish it as a letter to the editor.
"If representatives of the City of Memphis are really looking to save money, they should start by privatizing those municipal luxury services that lack any compelling government function.
Two obvious candidates are swimming pools and golf courses. Subsidizing such recreation can hardly be argued a necessary function of government.
Furthermore, the City of Memphis has hardly proved it has a comparative advantage in the provision of such services. And really, golf courses and swimming pools are private goods—rival and excludable—so there is no “market failure” to justify government provision. Finally, if these pools and golf courses cannot survive without government subsidies or ownership, they are a waste of valuable resources.
Since these are municipal operations and therefore are not sensitive to profits and losses, we cannot know if they are creating any value.
Without profits and losses to guide decision-making, such determinations over resource allocation boil down to competing value judgments and the use of political power.
The net result is an enormous waste of resources expended in a political battle that often trigger subsequent resource waste. Given our state of affairs, Memphis cannot afford this extravagance.
Next steps? The City of Memphis should privatize golf courses and swimming pools. But don’t simply sell them to the highest bidder. Instead, issue shares of stock to Memphis taxpayers. We’ve paid for these facilities, so we own them. Ownership shares would make this explicit, and privatization ensures that the resources will be allocated to the use that produces the most value.
My case is straightforward. But a disagreement over these indisputably decadent services indicates a problem with much deeper roots than politics. Instead it is one concerning fundamental philosophies about the appropriate operation of society. As we stand, Peter has the “right” to rob Paul so that he can swim or play golf more cheaply than he would be able to in a free market. Unfortunately, this view supposes that Memphis can be sustained as a community of thieves in which we live as parasites on the productive labors of others.
Make no mistakes. I’m certainly not against golf. Nor am I against swimming. And I’m definitely not against children. While privatizing golf courses and swimming pools means that some of them might close, they will be replaced with more valuable services that can earn income for their owners--in this case, Memphis residents.
Governments might have a number of legitimate functions, but subsidizing recreation is not one of them. When I was a kid, I learned not take things that didn’t belong to me. Have our representatives forgotten that lesson?
On the city's website, there's an option to book a tee time at a city golf course. As politically feasible privatizations go, I would hope that this is relatively low-hanging fruit. I don't have data on hand, but it's reasonable to believe that the average income of city golf course patrons is higher than the average income of city taxpayers. The first person to email me with data comparing golfers' incomes to others' incomes will get a copy of The Age of Economists: From Adam Smith to Milton Friedman, which is volume 26 in the Hillsdale College Ludwig von Mises Lecture Series. Note that when I say "golfers' incomes" I'm referring to people who play golf recreationally, not professionally.
June 23, 2009
Aid and Growth Thought of the Day
"World Bank researchers Deon Filmer and Lant Pritchett estimate that the return on spending on instructional materials in education is up to fourteen times higher than the return on spending on physical facilities, but donors continue to favor more observable buildings over less observable textbooks."
William Easterly, The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good, p. 190.
Even if this is over-estimated by a factor of ten, a 40% difference in ROI is enormous.
Peter Saunders on Capitalism
While going through some notes for a project Josh Hall and I are working on, I came across my notes on this excellent essay by Peter Saunders entitled "Why Capitalism is Good for the Soul." Here are some notes, quotes, and highlights:
Paraphrasing Peter Saunders (2007-08:3), capitalism delivers but fails to inspire. Socialism inspires but fails to deliver.
“Rockstars fly around the world in private jets to perform at sellout stadium concerts demanding action on global warming, and indignant youths coordinate anti-globalization protests using global communication networks.” p. 4
“Where is a moral crusade in buying and selling, borrowing and lending, producing and consuming?” p. 4
“…it is probably a mistake to trawl through the scriptures searching for nuggets that might support this or that system of political economy, for the word of God was never intended to be used as a blueprint for designing socioeconomic systems.” p. 5
According to Hayek (in Saunders’ words, p. 9), “Hayek understood that capitalism offends intellectual pride, while socialism flatters it.”
Cite: Saunders, Peter. 2007-08. Why Capitalism is Good for the Soul. Policy 23(4):3-9.
And as a bonus, here's a great quote from Ayn Rand on the differences between economic and poltiical power:
“…economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear.”
Cite: Rand, Ayn. 1966. Capitalism: The Unknown Ideal. New York: The New American Library, p. 41.
F.A. Hayek Quote of the Day
From The Road to Serfdom, 50th Anniversary Edition:
"It may sound noble to say, 'Damn economics, let us build up a decent world'--but it is, in fact, merely irresponsible." p. 230
Scrap "judicial activism"? Pros and Cons
Can we say whether the Roberts Court exhibits "judicial activism"? Who cares. The term lacks coherence and ought to be scrapped, argues Jost on Justice. In certain cases of the current term, we have judicial restraint (District Attorney's Office v. Osborne), in others apparently activism (Herring v. United States, Gross v FBL Financial Services). Jost concludes:
Some critics might...accuse the Roberts Court of unacknowledged activism. The better view is to evaluate each ruling on its terms without resort to labels. Interestingly, that is the approach that Richard Epstein, a leading conservative law professor at the University of Chicago, urges in evaluating Judge Sotomayor’s rulings. The phrase judicial activism “tells you nothing,” Epstein remarked to the New York Times. “The term ought to be scrapped.”
That view seems persuasive, but does it also tempt us not to question the proper role of the judiciary? Whatever label you want to use, the judiciary best serves a free society when it checks the powers of the executive and legislative branches at the federal, state and local levels to their constitutional limits, while not overstepping its own constitutional authorities. Whether judges uphold this principle is partly a function of their incentive structure. Perhaps ironically, when judges have no incentive to rule one way or the other, their rulings are more likely to uphold (as they see it) the constitutional powers of the respective branches. "Because the outcome of a case decided by an independent judge does not affect his or her wealth or power, it costs judges no more to do what they think is right than to do what they know is wrong." (Cooter and Ulen Law & Economics, 4/e p.425)
Of course, judicial independence is itself a tricky issue (do we want a court that's free to indulge in ideological or fashionable views?) and different institutional arrangements achieve independence in different ways. To both simplify and further complicate, Andrew Hanssen (AER 2004) suggests that there is an optimal extent of independence (simple), which depends on how politically competitive the other branches are (complicated).
Similarly, in a free society there is an optimal extent of judicial activism, one that's very tricky to pin down. This trickiness probably explains why "judicial activism" is something of a bright line that divides political ideologies. Conservatives want courts to uphold laws that legislate morality; whereas libertarians are happy to see the courts uphold privacy and individual rights against factional mores. Liberals want activism for social justice; libertarians want the courts to protect economic rights. They're all arguing whether we're on the right side of the optimum, not too much unlike a Laffer curve in tax policy. This trickiness probably also explains the urge to drop the "judicial activism" label: let's move on already! Okay, let's. But while systematic patterns across a range of rulings may be elusive, it is still worthwhile to evaluate individual rulings vis-a-vis the proper role of the judiciary.
A few useful pointers I want to save:
On the impact of Manny
The Sporting News Today reports that the Albaquerque Isotopes hope to take advantage of a few AAA starts by one Manny Ramirez:
The Albuquerque Isotopes of the Class AAA Pacific Coast League, expect to generate an additional $200,000 to $300,000 in ticket revenue this week during Dodgers left fielder Manny Ramirez's four-game stint with the club, owner Ken Young told SportsBusiness Journal's Don Muret. Ramirez, suspended 50 games for testing positive for performance-enhancing drugs, is eligible to return July 3 to the Dodgers and is using this week to get back in game shape.Will the Isotopes increase price for the Ramirez games or only experience an increase in quantity demanded? One key element is whether the games are sold out.
June 22, 2009
Letter in WSJ: Immigration, Housing, and the Drug War
This letter appeared in today's WSJ. I wouldn't describe restrictions on immigration as "well-intentioned," but I didn't write the headline:
"Well-Intentioned Policies Enable Immigrant Smuggling
The problems identified in the article about organized gangs smuggling undocumented immigrants across the U.S. border and then holding them for ransom ("Immigrants Become Hostages as Gangs Prey on Mexicans," page one, June 10) were created by a perfect storm of government intervention. The drug war has encouraged the development of international criminal syndicates and turned parts of the U.S.-Mexico border into actual war zones.
The war on undocumented immigrants has created opportunities for those syndicates to enter into the human-trafficking business. Cheap money and government policies aimed at increasing access to "affordable housing" created the housing bubble, and further intervention in the last year prevented housing prices from falling far enough to clear the market. This effectively created the "drop houses" in which criminal gangs abuse immigrants who have no legal recourse against them.
I expect that politicians will demand ramped-up enforcement, but this will be a mistake. The best way to proceed would be to end the war on drugs, end the war on immigrants, and scale back intervention in the housing market.
The Berry Bike Problem Goes Global
Re: Frank's post below, I wrote a letter to the "Globe and Mail" about the Parisian bike-sharing program. The letter appeared today:
"In her article on the unintended destructive consequences of Paris's bicycle-sharing program (Paris's Pedal Power Puts Thieves And Vandals In Motion - June 18), Susan Sachs quotes Le Monde saying the project "has increased uncivilized behaviour. No one expected that." Actually, a lot of people expected that.
Bicycle-sharing programs are often disasters because common ownership means no one has an incentive to care for the bikes. These programs can work, but they require that the authorities recognize the role of private property and prices in creating the right incentives. At the very least, those using the bikes should have to identify themselves to ensure they take responsibility for what they are using."
June 20, 2009
More College Grads?
Some thoughts on today's WSJ op-ed by Peter McPherson and David Shulenburger; for example they write
The bottom line is that education affects economics. The more educated a work force is the more value it adds to society. We can chart this by looking at the way income levels vary with educational degrees.
Maybe, but I bet most of the gap is selection bias and signalling. Stated differently, I'd bet that in a world without educational degrees we'd see similar, though not identical, gaps between today's college educated and high school educated. Next,
Given the impact education has on the economy, the U.S should set a goal of college degrees for at least 55% of its young adults by 2025. [snip] This goal would require graduating an additional 875,000 students per year -- a 42% increase of people with at least an associate's or bachelor's degree.
Higher ed is already doing it's part by dumbing down requirements, inflating grades, and the like. Handing out 42% more college degrees would devalue the already degraded bachelor's degree. A last bit,
We propose to: 1) enroll a higher percentage of high-school graduates, now 64%; 2) increase the number of adults returning to college; and 3) increase college graduation rates while maintaining educational quality.
With nearly two-thirds of h.s. grads going on to college and many needing remedial coursework, I'd say too many people, not too few, go to college. And the bit about needing to "re-establish" a link between higher ed and the state and federal governments is simply bizarre--government is neck deep in the higher ed market.
Such shoddy thinking makes me wonder where McPherson and David Shulenburger received the college degrees that I presume they possess.
Posted by E. Frank Stephenson at 09:39 PM
Odd Definitions of "Disruptive" and "Remedies"
The sale of certain Chinese-made tires is disruptive to the U.S. market, the U.S. International Trade Commission ruled Thursday.
It is the so-called remedies--the tariffs and quotas--that are disruptive here because it is those measures that will interfere with voluntary exchanges between Chinese tire makers and U.S. tire consumers. The WSJ article notes that Chinese producers specialize in lower priced tires so it's likely that the import barriers will fall most heavily on poorer Americans.
Paris's pedal power sets free uncivilized behaviour
Since the city's Vélib' bicycle-sharing program began nearly two years ago, Alexandre Wente has made a point of cycling from his apartment to his office at least once a week.
And this program is considered a successful one. Source.
Open Access Bike Programs--Won't They Ever Learn?
GREEN BAY - For the second year in a row, a bicycle sharing program in downtown Green Bay is seeing some problems. The bikes, meant for public use, are disappearing.
Source. Maybe someone there should have googled "Berry Bikes."
Here is a snip from a story two weeks ago announcing the start of the program:
GREEN BAY - After a few bumps in the road last year, Green Bay's free, bike-sharing program is back....
HT: Shawn Regan
June 19, 2009
Funny Line, Good Book
One gift, one time--that's bribery. Lots of gifts over a long time--that's politics.
That's from Jamie Malanowski's The Coup. It's a fun political satire that makes a good summertime read.
Posted by E. Frank Stephenson at 01:52 PM
The Increasing Relevance of Julian Simon: Singularity Edition
I'm reading Ray Kurzweil's The Singularity is Near as part of a handful of projects, and he offers the following (pp. 133-134):
"[MIT Professor Seth] Lloyd shows how the potential computing capacity of a kilogram of matter equals pi times energy divided by Planck's constant. Since the energy s such a large number and Planck's constant is so small, this equation generates an extremely large number: about 5X10^50 operations per second.
"If we relate that figure to the most conservative estimate of human brain capacity (10^19 cps and 10^10 humans), it represents the equivalent of about five billion trillion human civilizations. If we use the figure of 10^16 cps that I believe will be sufficient for functional emulation of human intelligence, the ultimate laptop would function at the equivalent brain power of five trillion trillion human civilizations. Such a laptop could perform the equivalent of all human thought over the last ten thousand years (that is, ten billion human brains operating for ten thousand years) in one ten-thousandth of a nanosecond."
This article about an apology and reparations for slavery caught my eye in light of the research I'm doing for a few projects on the economic history of the South. Here's Wlater Block's argument that convinced me of the appropriateness of reparations for slavery and Jim Crow.
1:10 PM Addendum: Check out this letter from former slave Jourdon Anderson to his former master. A quick calculation assuming a 10.47% average annual return--this is the long-run average annual return on the S&P 500--between 1865 and 2009 suggests that the $11680 in forgone wages Anderson claims to have been cheated out of by his former master would have grown to about $19.7 billion today. There are all sorts of other things that would need to be considered before we could find out exactly how much the master's heirs owe Anderson's heirs (the implicit value of food, clothing, & shelter provided by the master), but this is a starting point.
June 18, 2009
U.K. Minimum Wage Kills Apprenticeships
Moves to investigate offering the minimum wage to apprentices have prompted a mixed reaction from the sector, as organisations delivering apprenticeship programmes claim they would no longer be able to afford to do so.
What's Farsi for ACORN?
Yes, yes, I know the allegations about ACORN deal with bogus registrations not turnouts exceeding 100%.
Posted by E. Frank Stephenson at 09:41 PM
That Must Have Been A Mighty Long Clothesline
UPDATE: Apparently undie-snatching is going around--three people are wanted for nabbing 128 pairs from an Atlanta area Victoria's Secret.
Posted by E. Frank Stephenson at 09:36 PM
Economics of Emissions Testing & Corruption, Plus Response
This letter of mine appeared in this morning's Memphis Commercial Appeal:
"I've found the controversy over emissions waivers (June 16 article, "'Waiver' revs up in auto dispute / Inspection ordinance would OK illegal deal") especially interesting in light of my experience. After barely failing with an older car, we spent a few hundred dollars on repairs and at least an hour in line only to fail again, just barely. I asked if it was possible to get a waiver since I was barely over the hydrocarbon limit and could prove that I had made an expensive, good-faith effort to meet the requirements. I was told no such waivers existed. Hundreds of dollars and many hours later, we finally passed.
There are several lessons here that I plan to incorporate into my Econ 101 lectures on marginal analysis, externalities and public choice theory this fall. First, we have to ask whether the additional benefit of an almost imperceptible increase in air quality is worth the additional cost. I seriously doubt that the social benefit of a tiny reduction in hydrocarbons-per-million was worth the time and money we spent meeting emissions requirements.
Second, regulations like this increase the cost of owning older cars, which puts a special burden on the poor. We are fortunate because our experience with local emissions testing was just an expensive annoyance. For the poor, being saddled with the prospect of hundreds of dollars in repairs to meet emissions standards can be catastrophic.
Finally, this illustrates the law of unintended consequences. Emissions testing has encouraged some people to move outside the city limits. The consequences can be perverse: Regulations intended to improve air quality can actually worsen it. I don't know if this is true in metropolitan Memphis, but it is a possibility that deserves to be studied."
An anonymous commenter ("BogeyMan") posted the following response, which I found interesting:
"Professor Carden: congratulations on yet another successful attempt to justify your affiliation with those right-wing think tanks. I'm sure they'd be proud.
Since you probably don't believe in global warming, I'm not surprised you don't believe in doing everything we can to minimize humans' exacerbation of that problem.
Memphis has a history of just squeaking by the EPA's "non-attainment" (oops, I forgot---you probably don't believe there should be an EPA either), and every summer, we suffer from pollution alerts that create serious problems for outside workers and people with any kind of respiratory problems.
While your non-compliant car was only a tiny part of the pollution problem, in the aggregate, thousands of cars like yours (or worse) create a significant environmental problem.
And please, don't BS us with your feigned concern for the poor. You teach in a place where the parking lot is full of high-end, daddy-bought cars, and the ideology you hew to faithfully has never been much concerned with the plight of the poor.
Finally, no one moves out of Memphis because of car inspections alone. And if they do, their threshold for the requirements of urban life is so low, they've got many more problems with city life than car inspections."
June 17, 2009
Where Today's "Health Insurance" Comes From
There are a few points in the health coverage debate that bear repeating. First, what people call "health insurance" is not actually insurance. It is care paid for by third parties or at best, pre-paid care. Second, the fact that many of us get health benefits in addition to money income is an artifact of World War II-era price controls. Donald R. Stabile says this very well in his book The Living Wage: Lessons from the History of Economic Thought (which I'm reviewing for EH.Net), "the provision of health insurance by employers in the US was a historical accident of wage controls during World War II; the War Labor Board led employers attract workers with medical coverage without calling it a wage increase" (p. 127).
The Incredible Bread Machine
Courtesy of the Mises Institute, here's "The Incredible Bread Machine."
One tragic highlight: at 45:06, Benjamin Rogge says "When General Motors makes a mistake no one is required to buy a General Motors car" (HT: one of the commentors on YouTube).
There have been some pretty outrageous storms in Memphis over the last few days, and our Congressman has asked the Governor to ask FEMA for money. I found this interesting since I recently wrote a report for AIER on the economics of natural disasters. Particularly interesting in this regard are Russell Sobel and Peter Leeson's papers on FEMA and corruption; they're all available on Pete's website. This one is especially interesting; if their results are correct, we can expect a rash of corruption prosecutions over the next few months.
On curses c. 1909
The Chicago Cubs last won the World Series in 1908. Some blame the curse of the goat, others attribute this to the Merkle Curse, others blame bad ownership. I blame the fans - Cubs fans are "too" loyal in the sense that they continue to attend and support the team despite their poor history of post-season play. Teams with very loyal fans can skimp on quality (on the margin) and this might explain why the team hasn't had a breakout year in the last century.
The June 17, 1909 NYT reports on an incident that might deserve mention in this context:
Chicago's second successive world's championship pennant was hoisted to-day [June 16, 1909] after a parade of both teams, headed by a brass band. Just before reaching the top of the high pole, however, the rope pulley broke, and the emblem blew away back of the bleachers in centre field.\sarcasm Yep - if the team couldn't hoist the pennant correctly perhaps they don't deserve another one. \endsarcasm
June 16, 2009
The Median Voter Casts Lots
I caught this on NPR's "Morning Edition:"
When last month's town council race ended in a two-way tie, Mayor Vincent Francia thought it should be settled cowboy-style: "The two candidates would assemble downtown Cave Creek at High Noon and go at it with paintballs."
Instead they turned to Arizona law, which says tied local elections may be determined by chance: rolling dice, flipping a coin or cutting cards.
Cave Creek Magistrate George Preston, dressed in his black robes, shuffled the deck of cards Monday night that would finally decide the race. About 60 people crowded council chambers, including a few lawyers who had hashed out two pages of rules for the drawing.
The candidate drawing the highest card would be declared the winner.
Which got me to (barely) thinking: if the median voter theory is true, why not just save everyone the expense and headaches of campaigning and decide elections this way? Instead of three hourlong televised debates, you could, during a commercial break, show 30 seconds of McCain and Obama rolling dice to decide the winner. It certainly seems more efficient, since the FEC seems to indicate that there were almost $1.4 billion in total contributions to candidates in the 2008 Presidential campaign. How much does a deck of cards cost?
It also reminded me of the rhetoric of elections. How often do you hear of Presidents winning "landslide" elections? The Stat Abstract shows that the biggest percentage a recent candidate has garnered was Johnson's 1964 61.1%. If you had a student with a 61.1% average, would you consider him to have a "landslide" level of knowledge?
On taxation c. 1909
The June 16, 1909 NYT prints an editorial that is 180-degrees out of phase of the current version:
The Laffer Curve 70 years early!
The editorial then admits that the opponents of the income tax are starting to buckle and we have them to thank, in part, for our current taxation schemes:
Attempts by government to abridge the wealth of individuals can only be successful when seizure is absolute with no appeal and no ability to avoid the seizure. As this country has not experienced a government that has undertaken such an approach, attempts to abridge the wealth of individuals have essentially failed, to the dismay of our most recent Nobel Prize winning economist. On the other hand, the market can and will abridge the wealth of individuals if the individual makes a mistake. The market does not offer reprieve nor is it swayed by fancy dinners and tickets to a show. Too bad Teddy Roosevelt and his fellow travelers didn't see it that way.
There is a curious report that President Taft favors this tax, not alone because it would produce needed revenue, but "as a decided step forward in carrying out the policy of corporation control." When the taxing power is used for other purposes than raising revenue a wide range of possibilities is opened. The Supreme Court has said that the power to tax is the power to destroy. The note issues of State banks were destroyed by a 10 per cent. tax. The great example of the use of the power of taxation for an indirect purpose is our protective tariff. The protective duties not only produce revenue, they enable the interests they favor to levy for their own enrichment much greater taxes upon the people. That is State Socialism, not for the advantage of all, but for the benefit of a small class. Now we are told that we must levy a new tax upon the corporations as a means of getting them under control.I am not sure if the theory of State Socialism is grounded in helping the few at the expense of the many, but it seems to work out that way in practice. Nevertheless, the argument that taxation can be and is used to enrich the few at the expense of the many seems germane today.
The editorial delves a little deeper into the philosophical basis for the tax craze:
When the night dogs of Populism break loose all sorts of queer game are chased. It would be futile to import considerations of economic principle and of scientific justice into the discussion of a tax bill framed for the purpose of throttling the corporations. It is because of the deep-rooted, and, in many parts of the country universal, conviction that the corporations are fair game and may be, nay, must be, hunted in and out of season, that while we have at Washington earnest advocacy of an income tax, an inheritance tax, and of a corporation tax, imposts the supporters of which fondly believe would fall upon the fortunes of the rich and leave the poor untouched, not a word is said about a convenient and most productive form of taxation of which we had not long ago an enlightening experience - we mean the stamp tax.It seems that the conviction that the corporation is the root of all evil, that if it were not for corporations somehow we would ALL have iPhones and BluRay players, and if it were not for corporations we would all have a "living wage" still persists. That the corporation needs to be "under control" is a dangerously open-ended goal. There are "good" controls, perhaps limiting the imposition of negative externalities. There are, it would seem, many more "bad" controls, which force firm owners to do what they would otherwise not do under the threat of the gun.
The editorial goes on to describe how the stamp tax was used to finance, in part, the Spanish-American War and that it's imposition was a minor inconvenience. I am not familiar with the literature investigating this particular policy, so I will take the paper's word for it. The editorial winds up by asking why the stamp tax, which would raise revenue, is being shunned for the bigger prize of income taxes:
In the present state of public and Congressional opinion the defect of the stamp tax is that its burdens would be distributed throughout the community. It would diminish no great fortune, it would not increase the power of the Federal Government over any corporation. But as a means of accomplishing the direct purpose in view, of doing away with the deficit and providing revenue for the expenditures of the Government, the stamp tax has obvious merits. It is easily and quickly put into operation, the cost of administration is trifling, it is patiently borne, and does not provoke protests. At any other time, in a season when men's minds are not so desperately bent upon seeking out new ways for chaining down the corporations, the stamp tax would have many advocates in Congress.
June 15, 2009
Demand Curves Are Downward Sloping--Camp Counselor Edition
This story by an NC tv station nicely illustrates the win/lose nature of minimum wage hikes. A counselor indicates that she'll get a pay raise but that the camp is hiring fewer counselors than in previous years.
On Food Independence
Frank's post reminds me of the situation in Saudi Arabia in 1985. Saudi had supported the production of wheat to the extent that they were self-sufficient, at least for a while.
The rationale was to diversify so that Saudis wouldn't depend so much on oil revenue and could become trained in other endeavors. The reality was that Europeans set up and ran large wheat farms and used foreign labor. Few, if any, Saudis developed any farming skills.
To make the scheme feasible, the government sold water to the farmers at a fraction of the cost of desalination, and it set a price at about five times the world price (if my memory serves). The Economist ran an article saying that the price was high enough to make it worthwhile for smugglers to bring food-aid wheat from Ethiopia via Yemen to sell to the Saudi government.
I'm not sure, but I'm guessing the scheme went belly-up when the price of oil plummeted post-1985.
But these things never go away. Witness the "end" of the farm subsidies negotiated between Newt's Republicans and President Clinton.
An Interesting and Important Paper
The Market: Catalyst for Rationality and Filter of Irrationality by John A. List and Daniel L. Millimet
Assumptions of individual rationality and preference stability provide the foundation for a convenient and tractable modeling approach. While both of these assumptions have come under scrutiny in distinct literatures, the two lines of research remain disjointed. This study begins by explicitly linking the two literatures while providing insights into whether market experience mitigates one specific form of individual rationality—consistent preferences. Using field experimental data gathered from more than 800 experimental subjects, we find evidence that the market is a catalyst for this type of rationality. The study then focuses on aggregate market outcomes by examining empirically whether individual rationality of this sort is a prerequisite for market efficiency. Using a complementary field experiment, we gathered data from more than 380 subjects of age 6-18 in multi-lateral bargaining markets at a shopping mall. We find that our chosen market institution is a filter of irrationality: even when markets are populated solely by irrational buyers, aggregate market outcomes converge to the intersection of the supply and demand functions.
Mike Lester on
The cartoon appeared in yesterday's RN-T. A bit of context: Rome officials claimed that they installed cameras to reduce accidents not to generate revenue. A recent GA law mandating an extra second be added to the length of yellows at redlight camera intersections has reduced the number of tickets and has made Rome's cameras unprofitable. City officials have turned off two of the six and renegotiated the vendor's contract on the other four.
An interesting note on the city's use of the revenue--it was earmarked for the sidewalk fund (as if money isn't fungible). Some of the funds went for a rarely (maybe never) used sidewalk not too far from my house that my better half and I refer to as the "sidewalk to nowhere."
Posted by E. Frank Stephenson at 03:08 PM
Milk in the Desert & Institutions in India
While taking some family members to the airport yesterday, I caught two interesting stories on NPR's "Weekend Edition."
Here's a snip from a story on the Saudis raising cattle in the desert:
One day, the son of a king came to America to learn how to make milk in the desert.
Specialization and gains from trade--never mind. BTW, the story goes on to explain how the the wells used to sustain the cows are depleting an aquifer deep below the desert. So much for the "local food is better" bit.
The other story was a reporter's observations from India and had some nifty examples of institutions. A snip:
Singh grew up on a farm that has been in his family for generations. "I used to grow maize, barley, wheat," Singh says. "And it was real hard work."
Cutting Through the Spin
Here's President Obama speaking to the AMA earlier today (transcript here):
We are not a nation that accepts nearly 46 million uninsured men, women, and children. We are not a nation that lets hardworking families go without the coverage they deserve; or turns its back on those in need. We are a nation that cares for its citizens. We are a people who look out for one another.
He's not talking about charities etc.; he's talking about his schemes for health care reform. So, in my version Hannity's liberal translation segment, is what Pres. Obama was saying:
I'm going to use the coercive power of the government, including thousands of well armed officers, to confiscate income or accumlated wealth from some to pay for medical care for others.
Posted by E. Frank Stephenson at 02:38 PM
Good Question, Better Answer
Editorial from the San Bernadino Sun
Public service or self-service?
It should, especially to Californians. In New York, it is the reason a taxi cab license is worth $600,000 (because of fares rigged by paid-off politicians). In California, the cost of a vast range of services gets skewed by high pay and benefits for public employees.
The most extreme case is the state prison system, which costs taxpayers twice as much as the national average. The causes are pay increases and pension spiking that happened after the prison guards' union funneled huge political contributions to then-Gov. Gray Davis and to state legislators. What a coincidence.
[. . .]
Interestingly, when state politicians talk about funding problems in the state prisons, they never mention the political payoffs that doubled the payroll costs. When local politicians talk about huge budget problems, they never mention salaries that are out of proportion to the private sector or the horrendous and unsustainable pension obligations.
Posted by Wilson Mixon at 02:17 PM
The Journal of Private Enterprise arrived this morning. In addition to the articles by my DOL co-bloggers, I found this abstract interesting:
"Half of business ethics is determined by the definition of business. In stockholder theory the purpose of business is to maximize profit, while stakeholder theory maintains that the purpose of business is to serve all stakeholders. Both define business as an amoral activity requiring a separate moral theory to guide and constrain practitioners. This paper challenges the assumption that business is an amoral activity. Certain moral rules are a constitutive part of business and yield a definition of business that is also an ethical standard: Producing a good or service for trade."
Kline, William. 2009. Business as an Ethical Standard. Journal of Private Enterprise 24(2):35-48.
On protectionism c. 1909
The June 15, 1909 NYT prints an editorial focusing on how protectionism, specifically the tariff, harms the "little guy":
It does not seem right that we should make the wage earner bear the expense of the Government by paying him larger wages and then taking it away from him in the shape of taxation on what he wears. Surely clothing is a necessity.
The argument that the tariff reduces quality is generally under-appreciated. For example, while the U.S. automobile industry has any number of problems, it is undeniable that the quality of the automobiles for sale in the United States has dramatically improved after the U.S. auto market opened to foreign competition. This improvement in quality has occurred despite a number of attempts to limit imports (through quotas, tariffs, local content requirements, etc).
The editorial focuses on the downside of protectionism in the final sentences:
The whole tariff structure is built up on the pretext that it is for the good of the wage earners, and when it robs and cheats these it surely ought to be reformed. If President Taft makes a simple calculation as to the number of American citizens hurt by Mr. Aldrich's tariff scheme, it ought to aid him greatly in dealing with it when it reaches him.The word "scheme" is a great word for economic policy, the tariff being only one of thousands of schemes hatched by governments around the world on a regular basis. I like the word "scheme" because generally the policies are concocted by a very few individuals working in concert with politicians who enact policy with little concern for the unintended consequences.
Read More »
My perception is that the word is today reserved for those private citizens who fleece their fellows, e.g. Bernard Madoff. Yet, a Google Search of the word "scheme" in the news section yields the following headlines, which makes me feel a little better. Here is a sampling:
Only forty percent of the stories on the first page of Google search use "scheme" in the context of private individuals. The remainder are used in describing government programs.
Perception is not necessarily reality.
« Close It
Why I am Optimistic About the Long Run
Iranians are using Twitter to defy state-controlled media and report on the Iranian election (HT: Brock Tyra). For tyrants to thrive, they need to control the flow of ideas. This means that they need to control the media and they need to control the schools. Technology is changing the degree to which this is possible. Memo to the Chinese Communist Party: you will win a few battles, but you will lose the war.
Building Brand Equity: The Economics of Education...
...in this morning's issue of The Tennessean. Note that the headline is inconsistent with what we say. Our original headline was "Trading one monopoly for another." It was originally going to be a condensation and paraphrase of Mike's blog post on the question, but it changed directions in light of some of the things Josh mentioned in his lecture at IHS a couple of weeks ago.
June 14, 2009
The Chicago Approach, Take Two
The first paragraph of a Barrons article on GM's chairman:
DON'T BE HARD ON GM'S NEW CHAIRMAN EDWARD WHITACRE for confessing during an interview last week that he knows nothing about cars. He simply suffered a Joe Biden moment. Texans often tumble over their tongues when taking a stab at humility. In fact, few car companies, let alone their CEOs, know how to build cars, which is why so many of them are conking out. The Obama administration, in my view, picked Whitacre to run General Motors (ticker: GM) because he has a more important talent: He knows how to play Chicago-style politics.
June 13, 2009
Looking Out the Window: Warehouse Clubs and Weight
Charles Courtemanche and I have been working on a series of papers about Big-Box Retail (Walmart, specifically), and the new version of our Big Boxes-and-Obesity paper should be available and back under review soon. Forbes asked me to write an article about this paper; it's in the June 8 issue and on their website (no link because my Mac hates Movable Type).
One thing that is emerging in the new version of the paper is that warehouse clubs matter a lot. We think this is true for two reasons. The first is the income effect: lower prices equal higher real incomes, so we can buy better stuff. The second is warehouse clubs represent a different shopping technology: you get mostly brand names, largely in bulk. This allows people to constrain their future choices by stocking up on healthy foods now. My present self might anticipate loss aversion by my future self. Knowing this, my present self buys a load of healthy stuff that my future self won't want to see go to waste.
I got to experience both this afternoon. First, we bought a bunch of fresh vegetables at the Memphis Farmers' Market--presumably, we were able to afford this because on our last visit to Sam's Club, we were advised that we've saved $214 this year by shopping there (mostly on diapers and formula). Second, while I was at Sam's Club this afternoon, my wife called to see if I could find something for dinner. I thought "maybe we should just go out," but then I realized that I would probably order a burger & fries or something else I shouldn't be eating. I decided instead to find something healthier to prepare at home. Then it dawned on me that this is exactly one of the mechanisms by which we think warehouse clubs are reducing weight.
It's only a single data point and proof-by-introspection probably isn't going to fly at most journals, but at the very least it suggests to me that our story about the mechanism is plausible. I spent last Friday with Charles at UNC-Greensboro--a nice campus and a nice town, incidentally--working on this paper and another that will estimate the impact of Costco, Sam's Club, and BJ's Wholesale Club on grocery prices. We're adding more data, and both will be available by the end of the summer at the latest.
Folly and Presumption: Federal Reserve Lending Edition
I just sent this letter to the New York Times:
Your June 12 story about political influence on Federal Reserve lending decisions was distressing, but predictable. When the government commits to the principle that some industries and firms are "too big to fail," identifying those firms that are "too big to fail" necessarily becomes a political decision. Adam Smith addressed this over two centuries ago:
"The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it."
HT: Alex Tabarrok.
June 12, 2009
My baby boy Shane is opening a second Saba, at Oakhurst Square tonight. For info, see the web site that I, serving as Saba's official web slave, maintain.
Mea Maxima Culpa
I've committed my first major social networking faux pas. Apparently, I let TripIt.com send an "Art Carden wants to connect with you on TripIt" invite to basically everyone I've ever emailed from my Gmail account. That sound yiou hear is TFP growth slowing down as a result.
High Culture Friday: The Art of Economics and the Economics of Art
This is really, really impressive:
And here's the "making of" video that shows how the ultra-intricate social division of labour helped make it possible:
HT: A.J. Roach.
Today is a Great Day to Repeal the Minimum Wage
Here's David Neumark in this morning's Wall Street Journal arguing that next month's minimum wage increase will be particularly ill-timed. His book with William Wascher on minimum wages is on my summer reading list, I'll be reviewing a book on "living wages" in the history of economic thought for EH.net this month.
Last summer, Charles Courtemanche and I have played with the data to see if minimum wage increases increase or decrease social capital in a followup to our earlier paper on Walmart and social capital. Identification issues meant that our result wasn't meaningful. If you're curious, we found a positive relationship, but this could just as easily mean that places with strong social capital tend to be support high minimum wages. Further, a lot of our measures of social capital (playing cards with friends, for example) could increase because the opportunity cost of card-playing is a lot lower when you're unemployed or under-employed. That paper is in the freezer for the time being while we finish some of our other projects. Here are David Henderson's thoughts on high-wage policies and economic downturns.
If you're looking for a good morning read to complement Neumark's WSj piece, here is an excellent and accessible summary of the economics of the minimum wage and the state of the art in the empirical literature that Professor Neumark prepared for the Show-Me Institute in 2006. It's a staple of my econ 101 reading list.
Update: Shelby County is primed to pass a "prevailing wage law."
June 11, 2009
The Cartel Strikes
Alabama gets choke-slammed by the NCAA again. This kind of "cheating" is exactly what we should expect to see when we try to hold prices below their market-clearing levels. Anyone who has been to a big-time college football game knows full well that the marginal revenue product of a superstar college football player is a lot more than the cost of tuition, room, and board at a state university. Even when you add on all of the perks (facilities, for example), you're probably still a long way from the market-clearing wage of a top-tier player.
Here's a question I would like to ask on an exam: Assume that I have a distaste for exploitation. Can I in good conscience be a college football fan? Explain your answer using what you know about monopsony, transaction costs, the Coase Theorem, and public choice theory.
Extra Credit: If college sports exploit athletes, why doesn't competition arise?
One man's take in pictures as to why why bailouts are bad. It summarizes about a thousand pages of journal articles in five easy pics.
In a pinch?
The homosexual movement seems to be gaining small and medium size victories with relatively little fanfare. One wonders how much of the outrage we witnessed over the past eight years was purely political rather than principle - and I am casting aspersions at both sides.
Now there is evidence that while the self-described left has not waned in its support for openly homosexual men and women serving in the military, the self-described "conservatives" have increased their support for the policy by 12 percentage points over the past five years.
I question whether this is more to do with the shadow costs of allowing homosexuals in the military than a great change in heart. As the GWOT (or whatever we want to call it this week) seems to be perpetual, either more volunteers need to be allowed to volunteer or the threat of a draft of some form might become more real. On the margin, how much is the principle of keeping openly homosexual men and women from serving worth? If it isn't worth re-instituting the draft, this might explain the increased support on the part of the "conservatives."
Markets in Everything: Playstation 3 Controller Soap
Here. Makes a perfect gift for those who prefer gaming to showering.
HT: Michael Hulsey for the pointer and MR for the MIE meme.
Posted by E. Frank Stephenson at 02:02 PM
On swimming upstream c. 1909
The June 11, 1909 NYT reports on the attempts of the city council of Seney, Georgia (located near Rome, GA) to fight the tide of history:
The little town of Seney, near here [Rome, GA], has declared war on automobiles. At a meeting of the Town Council recently, after a spirited discussion, an ordinance was adopted prohibiting the use of automobiles within the city limits.
I grew up in the far northwest corner of the great state of Georgia (Lookout Mountain, Georgia) about eighty miles from Rome, and always found the angst of folks in that part of the state interesting.
Given recent political trends, the folly of trying to stave off the automobile a hundred years ago might now be viewed as prescient policy. How long until towns and cities around the country today to follow the path blazed so long ago by little Seney, GA.
I recently commented (on Facebook) about the fact that both my daughter and I turned 14 in the middle of a "bad recession" - me in 1981 and her in 2009.
A close and very wise friend who lives in India chimed in:
What recession? I'm in Texas, and the big cars, packed restaurants and mammoth servings speak of amazing prosperity, especially if you're visitng from India
Building Brand Equity--Current Issue of the Journal of Private Enterprise
The Spring 2009 issue of the Journal of Private Enterprise is out. It includes articles from three DOLers:
--Scott Beaulier and Josh Hall have an article on the Vienna and Virginia schools.
--Bob Lawson and Curt Green (no link) have an article on a classroom trading exercise. I use a variant of their game on the first day of my principles classes and find it to be a great introduction and icebreaker.
--John Charles Bradbury and I have a paper on spatially targeted government spending (aka pork) and heterogeneous constituent cost shares.
The issue also contains a symposium on business ethics and an interesting article by Steve Gohmann and Myra McCrickard on insurance mandates and health insurance premiums.
Posted by E. Frank Stephenson at 10:59 AM
On substitutes c. 1909
The June 11, 1909 NYT reports on concerns similar to those voiced today by some social conservatives:
Speaking yesterday before the National Conference of Charities and Correction at Buffalo, Mr. [Joseph] Lee had this to say about the plan urged by some philanthropists to feed school children at public expense:The question of public schools providing meals for "less advantaged" children is evidently not new and opponents voiced the same concerns 100 years ago as they do today. It is likely true that an undernourished child is less capable of learning, all else equal. To the extent that the public education system is intended to help create productive individuals who provide positive externalities, or fewer negative externalities, and to the extent that proper nutrition helps that process along, there might be justification for public schools feeding children.
However, as the quote points out, there are few areas of a child's life that doesn't indirectly or directly impact the ability to learn. Once the education bureaucracy has taken it upon itself to ensure "quality of learning" then all areas of a child's life become fair game, including medical situations, home life, and, today, stretching to anti-bullying legislation and the like.
In one sense the mission creep seems to be a direct assault on the freedoms of both the child and the parents. To many there is no compensation for these lost freedoms that justify the mission creep of the education system. For others, the mission creep is worth the expenditure so that no child is left behind. Whether the increased expenditures provide net social benefits would seem to be an empirical question but one that might be impossible to accurately assess. However, Coasian firm theory would suggest that there are limits to what the education establishment (as a quasi-firm) can internalize efficiently. It might not be practical, efficient, or even desirable for the schools to be teaching the three R's, while simultaneously discussing homosexuality with kindergartners (as they propose to do in NC), making sure everyone is healthy, fit, prepared to remain morally uncompromised, prepared to be morally compromised, to make sure that no child is bullied, and on and on.
It is not in the nature of the bureaucrat, perhaps, to recognize the limits of efficient internalization. Thus it is incumbent upon parents and tax payers to at least suggest some limits. Alas, appealing to efficient firm theory is not likely to stir the emotions of the masses.
The story goes on to suggest, much as people do today, that once schools start feeding students and providing medical inspections the country is on the slippery slope toward Socialism, not because of the teachers union but because the state starts to offer cost-effective (if not child-effective) substitutes to the family unit. I have bounced this hypothesis off my colleagues during more than one lunch. If parents are rational economic agents, and it is dangerous to assume they are not, then they are likely to substitute into relatively cheaper inputs to their household production function.
Whether this constitutes State Socialism is a matter of opinion, perhaps, but it seems clear that the politicians and bureaucrats have figured out that some (most?) people demand, implicitly or explicitly, cheaper inputs to their household production function and the politicians/bureaucrats are all too happy to provide them. Unfortunately, when it comes to the care of children, the state's provision of care is what economists would characterize as a credence good - that is one where quality cannot be accurately assessed even after consumption. For example, how much better would Johnny have done in college if he had attended private high school? He can't repeat high-school so we will never know. Producers of credence goods get a little more scrutiny by industrial organization economists and policy (e.g., past limitations on lawyers advertising) but surprisingly not so much when it comes to education (and ostensibly health care in the future).
The NYT story continues on with a kernel of economic intuition coated in the spectre of Socialism:
My understanding of Socialist theory is that the claims of the story are generally correct. The family unit was destroyed under most (all?) of the implementations of State Socialism of which I am aware. Children were turned against their parents and other relatives and as a parent of three youngsters I am not sure there would be anything worse than such an event being caused by pure politics (rather than true criminal behavior).
It is an interesting thought experiment whether the State can survive without the Family. This has me thinking about an Econ Talk podcast from a couple of years ago (to which I recently re-listened) of Bruce Bueno de Mesquita on how politicians stay in power, and how his hypotheses mesh with the concerns of those who see the State achieving an agenda through the children.
Markets in Everything: Austro-Libertarian Dystopian Fiction at Zero Price
HT to Marginal Revolution for the "Markets in Everything" Concept.
Cycling c. 1909
The June 11, 1909 NYT reports:
PARIS - "Bobby" Walthour, the American bicycle rider, to-night won a fifty-kilometer motor-paced race in 41 minutes 21.5 seconds.If I push the buttons on my hand calculator correctly, using 1909 technology Walthour averaged 72.5 kilometers per hour or 45 miles per hour. Not bad for 1909 but not quite the 152 mph "achieved" by John Howard in 1985.
Today I went out with my 2007 technology (LeMond Alpe d'Huez with Schimano 105s) and averaged
Obviously Walthour was doping.
Advancing the Economic Way of Thinking, One Letter at a Time
To The Tennessean:
"On June 11, the Tennessean editorialized that comprehensive state energy standards and building codes won't affect housing for the poor because it will only affect new construction. This isn't true. Old houses and new houses compete in the same market, and making it more expensive to supply new housing means less housing overall. As new housing become costlier, older housing becomes more attractive. This means higher housing prices for everyone, not just people purchasing new construction.
Beware of anything that looks like a free lunch. You usually end up paying through the nose."
June 10, 2009
New Editor of the AJES
Via a press release from UMKC.
KANSAS CITY, MO. -- Frederic S. Lee, Professor of Economics in the University of Missouri-Kansas City (UMKC) College of Arts and Sciences, has been appointed as editor for the New York-based American Journal of Economics and Sociology (AJES). With support from the Robert Schalkenbach Foundation, AJES was founded in 1941 to provide a forum for continuing discussion of issues emphasized by the American political economist, social philosopher and activist Henry George (1839-1897).
How Big is Big?
If I ever teach Public Finance, this will be an integral part of the course (HT: Stewart Dompe).
Rhodes Political Economy?
One of the really great things about this job is getting to see your students succeed. I just got an email from 2007 graduate Jerrod F. Anderson, who was awarded a Mercatus Fellowship to get a master's degree in economics at George Mason. I think Courtney Collins will be on the market out of Texas A&M next year (I was told when I arrived at Rhodes that I had been hired to "keep Courtney's office warm" while she finished graduate school). Three of our 2009 graduates are entering the PhD program at Texas A&M this Fall and another will spend a year in the Koch Associates Program before starting graduate school. A handful of students have presented papers at professional meetings (MVEA, Public Choice, and APEE). I'll be revising a few student papers for future contributions to The Freeman, the Mises Daily, and a few other outlets. Some of the students who attended last week's IHS Liberty & Society Seminar at Wake Forest are now blogging. Here's a contribution from one of the bloggers that applies what we discussed in Econ 323 last semester.
Slavery, Immigration, and the State
One of my main projects this summer is an essay on the economic history of the South for the Oxford Handbook of Southern Politics. In my reading on antebellum slavery apologetics, I'm struck by the similarities between the apologetic rhetoric of slavery, the apologetic rhetoric of socialism, and the apologetic rhetoric of anti-immigration. Like apologists for socialism, apologists for slavery ignored the fact that traffic moved in one direction. Slavery's apologists spent a lot of time and energy pontificating on the morally ennobling virtues of slavery. They also spent a lot of time and energy wringing their hands about the prospect of violent slave insurrections and advocating government policies to keep slavery secure. Just as literal boatloads of people are trying to leave Cuba for the United States while hardly anyone wants to go in the other direction, lots of people were trying to escape slavery while few (if any) were trying to become slaves.
Consider also a common objection to free immigration. As the story goes, immigrants don't have the cultural capital necessary for participation in a free society; therefore, allowing more immigrants will inevitably lead to the destruction of American society. Apologists for slavery made the same argument about the alleged undesirability of emancipation: the slaves were not fit to participate in civil society; therefore, they should remain enslaved.
This is really fascinating stuff, and it shows how those who ignore history are doomed to repeat it. I'll have (much) more on this later.
On government efficiency c. 1909
The June 10, 1909 NYT reports on a misguided "change" in the Postal system that sounds very similar to our experience with the Susan B. Anthony dollar:
As a matter of imperative necessity, Postmaster General Hitchcock has decided to discontinue the new green special delivery stamp and return to the familiar blue stamp showing a specially delivery messenger boy mounted on a bicycle. In the great rush with which the mails must be handled many letters bearing the new stamp have escaped treatment as special delivery material because of the new stamp's similarity in size and color to the one-cent stamp. In some instances delays in delivery of such letters have caused serious loss to the public and embarrassment to the post office department.I find such stories interesting. It would seem the time horizon of the government would be longer than that of the private sector. Thus, the government, what with its hands deep in our pockets, should have plenty of time and money to undertake feasibility studies of decisions such as the special delivery stamp or the Susan B. Anthony dollar. Why not perform some sort of experiment to determine whether the individuals who are processing the mail can do so in a timely manner with the new stamp? Why not be open to public comment (whether the public at large or a subset, say, postal employees) on such ideas?
I understand that bureaucrats likely view their job as precisely making these types of decisions without input from others. That is the potential source of any number of bad ideas, some of them obvious - such as the stamp or the SBA dollar - and many more of them less obvious. After all, when a private concern screws up then real money and real jobs are at stake; when a public concern screws up, it merits twelve lines in the New York times.
On health insurance c. 1909
"Fixing" the U.S. health care system is all the rage this Congressional session. My prior is that the unintended consequences of increased government intervention in this market outweigh the benefits, but that's just my opinion. The June 10, 1909 NYT reports on proposals to integrate the private life and accident insurance industry into the personal health care industry:
Mr. Henry B. Hyde originated in large part the aggressive methods that built up the great insurance companies. He recognized the tendency in human nature to procrastinate in making necessary provision for death, which is inevitable, and for accidents and sickness, which are probable or possible. It was easy to make responsible heads of families admit these truths; the admission once made, they were vulnerable to the insistence and importunities of the insurance agent. A field for attack was opened up, and Mr. Hyde and his successors occupied it to the benefit of the Nation.
Best. Swag. Ever.
The Murray Rothbard "Enemy of the State" flask. Some have suggested that the next logical step is a cigarette case featuring a prominent Austrian economist (did Mises smoke? I know Hayek did). I would like to see this conclude with a complete and official "Alcohol, Tobacco, and Firearms" set. Perhaps the Mises Institute could team up with the Ayn Rand Institute to produce customized dollar-sign cigarettes?
Disclosure: since I write for the Mises Institute (here's today's contribution) and will be on the faculty at Mises University at the end of next month, skeptical readers might want to take my enthusiasm for their products with a grain of salt--a grain that, perhaps, could someday be dispensed from a Frederic Bastiat or J.B. Say salt shaker.
Immigrants, Drugs, and the Housing Market
Here's a letter I sent to the Wall Street Journal this morning:
"The problems identified in June 10th's article about organized gangs smuggling undocumented immigrants across the US border and then holding them for ransom were created by a perfect storm of government intervention. The drug war has encouraged the development of international criminal syndicates and turned parts of the US-Mexico border into actual war zones. The war on undocumented immigrants has created opportunities for those syndicates to enter into the human-trafficking business. Cheap money and government policies aimed at increasing access to "affordable housing" created the housing bubble, and further intervention in the last year prevented housing prices from falling far enough to clear the market. This effectively created the "drop houses" in which criminal gangs abuse immigrants who have no legal recourse against them. I expect that politicians will demand ramped-up enforcement, but this will be a mistake. The best way to proceed would be to end the war on drugs, end the war on immigrants, and scale back intervention in the housing market."
June 09, 2009
Arnold Kling on Health Care
Courtesy of the Cato Institute's "Weekly Video," here's Arnold Kling:
FWIW, I get a bit dizzy when I contrast the resources that are available to my students today that weren't available to me when I was an undergraduate just a decade ago. I got my first cell phone during my first year of grad school and my first laptop during my third year of grad school. I don't think I knew what a "blog" was as an undergraduate, and the idea that I could get expert commentary on any issue with the click of a mouse was a dream. I graduated from college a few months before Steve Jobs introduced the iPod to the world. "Doom II" was the height of video game technology when I was a freshman. My first vehicle was a brontosaurus. And so on: the point is that a lot of what my students and I take for granted today was either cutting-edge or hadn't been invented when I was in school. Recession or not, it's hard not to be optimistic about the long run.
Auburn makes the Top 10
No, not in football silly; now that would be big news!
We're one of the top ten ten best places to live according to US News.
Posted by Robert Lawson at 02:54 PM
Shut Up, He Explained
This letter to the Economist offers a useful suggestion:
There used to be, in the world of restructurings in the London market, a practice operated in a firm but gentlemanly manner by the Bank of England called the London Approach. It sounds as if the process under way for Chrysler, and widely anticipated for General Motors, could probably be dubbed the Chicago Approach.
Another Link: Walter Block's "Defending the Undefendable"
Dispatches from the Class War: Barack Obama Goes to Denny's
IHS Liberty & Society Links
I'm back from last week's IHS "Liberty and Society" Summer Seminar at Wake Forest. Josh Hall, Steve Davies, James Stacey Taylor, and Bob McNamara led a group of excellent students on a thrilling tour of classical liberal ideas. Over the course of the week, we added links to additional readings and resources to the group Facebook page. Most of these have links to full-text downloads and other zero-price resources. Those links are below the fold. Some of the students have also started a blog.
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2. Michael Munger's article on the success of governments trying to pick winners and losers.
3. Scott Beaulier's homepage, where you can find out everything you want to know about Botswana.
4. My SSRN research page, which has links to a couple of papers on economic freedom and all of my Walmart papers.
5. Here is the Fraser Institute's Economic Freedom of the World index (the one Josh works on). Here is the Heritage Foundation's Index of Economic Freedom.
6. Here's a paper by Gary Becker and Julio Jorge Elias estimating what the price of kidneys would be in a free market.
7. Here's the Google Books entry for James's book Stakes and Kidneys. Sally Satel takes on altruism and argues that kidney donors should be compensated. Steven Pinker takes on "The Stupidity of Dignity" in the context of bioethics. Here is Kieran Healy's research website.
8. We talked a lot about the economics of prohibitions on certain kinds of transactions. Here's a volume on prohibitions edited by John Meadowcroft and published by the Institute of Economic Affairs. Here is Josh's review.
9. Wendy McElroy offers "a site for individualist feminism and individualist anarchism."
10. The ideological foundations of slavery make for tragic history and fascinating historiography. Here's an excellent recent treatment by Elizabeth Fox-Genovese and Eugene D. Genovese. I'll be integrating their insights into a project I'm working on as soon as I'm finished with this post.
11. Lysander Spooner didn't agree to this.
13. We spoke briefly on the intellectual climate in Vienna in the late nineteenth and early 20th centuries. Here's a brief biography of F.A. Hayek. Jorg Guido Hulsmann has recently written a massive, authoritative, and fascinating biography of Ludwig von Mises. Here's the preface, and here's a PDF of the entire thing. Mises.org also has a series of video lectures from Hulsmann on the life and work of Mises.
15. Repeat after Josh: education is not a public good. Newcastle University's E.G. West Centre promotes "Choice, Competition, and Entrepreneurship in Education." Here are my comments on a recent working paper by Lant Pritchett and Martina Varengo. They argue that the reason states supply education is to inculcate certain values that would be difficult to observe if they were provided privately. This is one of the reasons why the Alliance for the Separation of School and State exists. The market does not fail to finance higher education in efficient quantities (Cato Policy Analysis by Miguel Palacios). Here is Kerry A. King's paper arguing that all of the relevant externalities from K-12 education are internalized by the market, and here are Eric Hanushek's articles on education. Michele Boldrin and David Levine argue that we do not need patents. You can download their book Against Intellectual Monopoly here. Terence Kealey's The Economic Laws of Scientific Research makes similar points.
16. Here is an excellent EconTalk discussion with Mike Munger on the economics of recycling. This page includes a lot of great links on the economic way of thinking applied to environmental issues. Along the same lines, here is my Earth Day contribution to Forbes.com and the related academic paper. The takeaway point is that without private property, profits, and losses, we can't articulate what responsible environmental stewardship would mean.
17. Frederic Bastiat, Super-Genius. "That Which is Seen, and That Which is Not Seen" explains what came to be known as "the broken-window fallacy." Here is a PDF of his rousing polemic The Law. In addition to the Henry Hazlitt and Eugen von Boehm-Bawerk t-shirts I was sporting last week, the Mises Institute also offers a variety of other shirts featuring Austrian economists and "Champions of Liberty." Or you could just read Economics in One Lesson (online, zero-price).
18. Robert Higgs, Depression, War, and Cold War (required for Econ 339!). Here is an EconTalk podcast with Amity Shlaes on the Great Depression.
19. F.A. Hayek on Spontaneous Order. Hayek offers examples from nature that show what we can know (general laws) and what we can't know (specific, minutely-detailed outcomes).
20. Amy Chua's World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability. Since reading Lant Pritchett's Let Their People Come, free immigration has been my hammer that can drive all nails. If western countries were to open their borders instead of trying to export their institutions, would this lead to more peaceful marketization?
21. Angus Maddison has collected all sorts of data on global economic history, all of which can be downloaded here.
22. Google Books has selections from Natalie Stoljar's work on autonomy.
23. Do we need the FDA? Daniel Klein and Alexander Tabarrok say "no."
24. Here is Lant Pritchett's Let Their People Come: Breaking the Gridlock on Global Labor Mobility, downloadable for $0.00. Drop what you're doing and read this.
25. Courtesy of IJ, here is a report on the demographics of eminent domain abuse. Here's the Wikipedia page for Berman v. Parker, and here are articles and videos from the Institute for Liberty and Democracy (Hernando de Soto's organization).
26. Deirdre N. McCloskey is one of my intellectual heroes. You can download drafts of some of her current projects from her website. Here is a short summary of her book The Bourgeois Virtues: Ethics for an Age of Commerce. Here is a draft of the complete manuscript.
27. The Library of Economics and Liberty contains full-text, searchable versions of a lot of classic texts in economics and classical liberal thought. These include, for example, Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations, Leonard E. Read's classic "I, Pencil", and Hayek's "The Use of Knowledge in Society." I also recommend Hayek's "Competition as a Discovery Procedure." Ludwig von Mises's "Economic Calculation in the Socialist Commonwealth" is one of the most important pieces of social theory ever written.
29. And now for something completely different, here are our friends from Monty Python on Philosophy Football. As a bonus, here's Monty Python on argument. As an added bonus, should the government subsidize R&D, like (for example) the development of silly walks?
30. Here is Murray Rothbard's essay "Law, Property Rights, and Air Pollution" in which he argues for strict liability in cases of pollution.
31. Glenn Greenwald offers a study of how drug decriminalization has worked out in Portugal.
32. Bryan Caplan's The Myth of the Rational Voter: Why Democracies Choose Bad Policies explains why democracies choose bad economic policies. The Cato Institute published a short version as a Policy Analysis in 2007. Here's a debate in which I argued that your vote does not matter.
« Close It
Extra! Extra! White moving to GMU
DoL blogger and free banking extraordinaire Larry White is moving to GMU.
I'm sure the Indian food is much better in D.C. than St. Louis, Larry.
I need help locating a copy of the following paper.
A web search yielded nothing, nor did contacting the authors. I've seen it cited several times, so I'm hoping someone out there has a copy. If you do, please email me at halljc-at-beloit-dot-edu. You'll have my gratitude and some nice DOL swag for your efforts.
June 08, 2009
On rival leagues c. 1909
Rival sports leagues often have a hard time establishing a foothold against the dominant league. Those sports leagues who have viable franchises are often asked to merge with the dominant league - which happened in baseball long, long ago, and more recently in basketball and hockey.
The June 8, 1909 NYT reports on the demise of the Eastern Baseball Association:
The new Eastern Baseball Association, which started with clubs at Newberg [NY], Poughkeepsie, Middletown, Kingston, Amsterdam, Schenectady, Gloversville, and Johnstown, was disbanded on Sunday after eleven days of existence. Poor patronage and lack of capital killed the league.This will definitely make it into the next version of my sports economics lecture notes. Eleven days?!? At least the team owners didn't mess around and drag out the inevitable folding of the league.
Also, team owners didn't appeal to their local governments for subsidies and new stadiums.
June 05, 2009
Building Brand Equity: "Shock and Awe"
I'm on my way back from the IHS Liberty & Society Summer Seminar at Wake Forest (via a day at UNC-Greensboro with Walmart co-author Charles Courtemanche), and I'll be posting extensive notes on the seminar soon. Meanwhile, I just received word that my paper "Shock and Awe: Institutional Change, Neoliberalism, and Disaster Capitalism" was published in the June issue of the Journal of Lutheran Ethics. Here's the published version.
Happy 286th Birthday Adam Smith*
*The exact date of Smith's birth is unknown, but his baptism date was June 5, 1723.
Posted by Robert Lawson at 09:49 AM
June 04, 2009
Twenty Years Ago
Posted by E. Frank Stephenson at 10:49 AM
June 03, 2009
Thanks to Tom Glavine
One often hears griping about boorish behavior, steriod use, and the like from professional athletes. Tom Glavine's generosity with his time last night to sign autographs--including one for Pee Wee (see photo below)--is a nice contrast. Glavine was in Rome for a rehab start (he gave up no runs and was especially sharp in his last 4 innings) and, by coincidence (scheduled long before it was announced that Glavine would be pitching), Pee Wee's little league team was the team of the night for the game.
BTW, the ballpark was sold out when it probably would have been no more than half full on a normal Tuesday night. In my Rome Braves paper on stadium alcohol availability, I estimated that Chipper Jones increased attendance by one-third and less well known players by perhaps 10%. The Glavine effect appears to be larger, though n = 1.
June 02, 2009
New Frontiers in Big Brotherism
Posted by E. Frank Stephenson at 11:04 AM
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith
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